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Supreme Court's dubious send on faxes

Thanks to the U.S. Supreme Court, a small army of plaintiffs, attorneys and self-appointed activists have more license to go after businesses that send them junk faxes.
/ Source: Forbes

Pity the hapless travel agent or car dealer whose fax advertisement happens to appear on a fax machine belonging to one Ben Livingston of Seattle, Wash. A self-described "small-claims warrior," Livingston has made a side business out of suing these companies and many more for the sin of sending him unsolicited fax ads, better known as junk faxes.

"Rather than just hang up, recycle or delete, I've been filing small claims against these obnoxious marketers," Livingston declares on his Web site, which also offers an 11-chapter guide on how to turn tables on telemarketers, junk faxers and spammers. To further humiliate the businesses, Livingston posts all the court documents and letters he sends, in which he typically demands a standard $500 fine, or $1,500 if the fax was sent knowingly. In all, he says he's collected about $6,000 in three years.

Now, thanks to the U.S. Supreme Court, Livingston and a small army of plaintiffs, attorneys and self-appointed activists have more license to go after businesses that send them junk faxes. In refusing during the week of January 12 to hear a case that claimed the 1991 federal ban on unsolicited faxes violates free-speech rights, the high court let stand a lower-court ruling involving a lawsuit filed by the state of Missouri against The suit accused, once the largest fax blaster in the U.S., of illegally sending unsolicited ads to fax machines in the state.

But by declining to hear the lower court's case and allowing the Telephone Consumer Protection Act of 1991 to stay intact, the court has effectively sanctioned an unintended consequence of the law that has ensnared many businesses in a legal web of fines, threats and a lot of aggravation. "What's happened is there's a whole cadre of lawyers who want easy money," says Wolfe & Wyman attorney Stuart Wolfe, whose Irvine, Calif., firm is defending several clients accused of sending junk faxes.

E-mail spam and the growing laws against it have provided additional inspiration for the high-tech ambulance chasers, though e-mail senders are harder to track down than junk faxers. Big companies aren't immune, even if they are only involved peripherally. Cox Communications is fending off a lawsuit accusing it of providing with telecommunications services. The company is attempting to get the claims dismissed.

"Since 1991, this damages scheme has spawned a cottage industry," argued in one of its appeals briefs in the Missouri case. Adding to its misery, the U.S. Federal Communications Commission, which enforces the TCPA, slapped with a $5.4 million fine on January 5, the largest ever for violating the TCPA.

Good luck collecting. As it is, is all but out of business, though various reports have suggested the Aliso Viejo, Calif., company has split itself into various pieces and is still sending faxes under other names. At its peak, the company boasted of a database containing 16 million fax numbers and 30 million "untouched" fax numbers, and that it could blast out as many as 3 million faxes a day on behalf of Merrill Lynch, Mail Boxes Etc. (now a unit of United Parcel Service) and other customers. To find fax numbers, the company used a sophisticated automated "war dialing" system that randomly called and recorded millions of fax numbers.

But in a contentious December deposition in a case in which is being sued for the laughable sum of $2.2 trillion by high-tech entrepreneur Steven Kirsch of Infoseek fame, founder Kevin Katz claimed that "all the lawsuits" are responsible for driving away most of's business.

No kidding. The laws and stiff fines ranging from $500 to $1,500 — applied to each fax rather than the mass — make junk faxes a tempting target for plaintiffs' attorneys and similar ilk, who can file private civil actions independent of the FCC's own fines. Many practitioners offer step-by-step instructions on Internet sites, printable legal forms and names of attorneys who specialize in the trade.

But while junk fax bashers champion themselves as defenders of the little guy, or at least his fax machine, the faxers themselves accuse them of running legal shakedown schemes. In an interview with Forbes last year,'s Katz called the practice "blackmail and extortion," among other choice words. On the other hand, didn't exactly help its cause when it sent 1,634 junk faxes in one week in 2001 to the Washington, D.C., law firm of Covington & Burling, resulting in yet another successful lawsuit against the company.

Despite the Supreme Court's refusal to hear the Missouri case involving, the company's lawyer vowed to continue to press on. "The court's decision not hear the case is just that," says David Felsenthal of Los Angeles. "They didn't put approval on the circuit court's opinion. The Eight Circuit's decision is not necessarily the end of the story and it's still's position that the statute is unconstitutional.", or what's left of it, and any other business that faxes ads received a slight reprieve from even more draconian FCC rules, which will require written permission from fax recipients, rather than just verbal or tacit approval from a preexisting business relationship. After opposition from businesses last summer, the FCC pushed back implementation of the new rules until the beginning of next year.